Bitcoin’s Washington problem

The Bitcoin Foundation, a nonprofit organization that represents the currency’s interests, does say it has plans to lobby in the future, but would not confirm having any lobbyists on staff. Charles Hoskinson, director of the Bitcoin Education Project and chairman of the Bitcoin Foundation’s education committee, said Bitcoin could look to some large companies to lobby on its behalf.

For instance, Bitcoin’s capability to allow payment by cellphone means anyone who controls cellphone eco systems, like Apple or Microsoft, could have an incentive for the technology of Bitcoin to be around.

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“I anticipate Google will be invested in the next 24 months because they’ve already invested in Bitcoin,” Hoskinson said. “It looks like they’re trying to have Google wallet be a central hub where you can deposit dollars or Bitcoins or any currency you want, so Google has an incentive for the technology of Bitcoin to be the least regulated as possible.”

Financial and banking regulations are the most pressing policy problems Bitcoin faces. Money transmitter laws require that money transmission businesses register individually in almost every state, but small Bitcoin exchanges don’t necessarily have the resources to secure legal compliance in each state.

In addition, Know Your Customer regulation requires financial institutions to have extensive information about the customer they’re working with. This is also a problem for Bitcoin exchanges, because it would require individual exchanges to collect personal information from users.

Tax law, whether regulations or any congressional legislation, is likely to hit Bitcoin the next few years, Hoskinson said. Because there isn’t a middle man, Bitcoin presents challenges similar to cash. The government doesn’t know how much money is made off of transfers using it, making collecting income tax more difficult.

Privacy rights are another key issue. Bitcoin is a pseudo-anonymous currency, in that while transactions are documented, they are not tethered to a person’s identity. When money is digitized, the government knows about every purchase. Hoskinson says there is talk among lawmakers of requiring identities to be attached to the transactions, and while neither the Bitcoin Foundation nor DATA has taken a stance on anonymity, Hoskinson says no one in the Bitcoin community wants people to be forced to tether their identity to their Bitcoin transactions.

So the Bitcoin community may be on its own when it comes to privacy.

“[Google and cellphone companies] would probably be big proponents of allowing the technology to exist but not necessarily the biggest proponents in the world about the privacy rights,” Hoskinson said.